We need to cardinally change the energy security paradigm

13 July 20171085

A round table was held as part of the meeting of our Committee: "Ukraine and the Natural Resource Governance Index: What Kind of Solutions Does the Extractive Industry Need?"

Together with the Members of Parliament, representatives of the Government, international organizations, directors of extractive companies and experts, we have discussed the state of extraction of natural energy resources in Ukraine, urgent problems and the ways of their solution. Unfortunately, I have to acknowledge that the pace at which Ukraine is now increasing extraction is extremely low.

If we want to achieve gas consumption only from our own resources, it will take about 50 years if current consumption and growth rates are maintained. In order to increase the volume of natural gas production up to 27 billion cubic meters per annum by 2020 (i.e. by 35%), it is necessary to attract about 1.7 billion US dollars per annum, that is, 7 times more than today.

The key issue for Ukraine is the lack of clear rules in the extractive sector of energy resources. When the rules can change on an annual basis, usually not in favor of investors, and when a country begins to burden investors with its internal problems and obligations, investors do not want to go to such country. It is very important for us to be competitive in terms of attracting investors. We need to compete in terms of legislative conditions, simple and clear rules of regulation, fiscal policy and many other positions. Once, Ukraine was an exporter of energy resources, and now it has a great potential to increase the volume of their production.

In the middle of the 20th century, natural gas of Ukrainian origin was transported to Russia, Belarus, Lithuania, Latvia, Poland, Czechoslovakia and Austria.

In 1940, Ukraine produced 495.1 million cubic meters of gas, while Russia produced 209.9 million cubic meters of gas.

40 years ago, Ukraine produced twice as much gas as it consumes today.

In 1972, the maximum volume of oil and gas condensate production was reached – 14.4 million tons.

In general, 2 trillion cubic meters of gas have been extracted from the subsoil of Ukraine within more than 90-year history of the gas industry (since 1924).

I must stress the need for creating a competitive environment and the importance of opening a market for both the state as an investor and for other domestic and foreign investors. On behalf of the Committee, I propose to use the "platform" of the Committee to hold a separate discussion of the problems of the extractive companies in order to ensure their reliable and transparent work.

We need to fundamentally change the paradigm of energy security, because Ukraine has all necessary resources to form energy independence.

For reference:
The Resource Governance Index (RGI) for 2017 estimates how each of the 81 countries having rich natural resources, manages its reserves of oil, gas and minerals. The complex indicator of the Index consists of three components. Two of them measure the output of the industry – use of resource potential and revenue management, and the third one covers the broader context of the governance – favorable environment. These three governance dimensions consist of 14 subcomponents, which are calculated on the basis of the analysis of information in open sources and answers to 149 questions. The oil and gas sector of Ukraine received only 49 out of 100 points and ranked 44th among the 89 countries estimated according to the RGI.